Private Student Lenders and Servicers Face CFPB Scrutiny

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Regulators and congressional leaders have identified similarities between the

lending practices that led to the subprime mortgage crisis and an escalating default

rate in the burgeoning level of student loan debt. Rather than wait for a student

loan crisis, they appear poised to act to prevent one by various means, including by

the reform of student loan servicing practices. To this end, in 2012 the Consumer

Financial Protection Bureau released two major reports aimed at curbing purported

violations of law. In addition, in March, partly to address the complaints of student

loan debtors, the CFPB announced its intention to supervise and examine the larger

non-bank education loan servicers.

This commentary reviews the 2012 CFPB student loan ombudsman’s annual report,

the CFPB’s December 2012 release of examination procedures for student lenders

and the proposed regulation on the supervision of non-bank student loan servicers.

Taken together, these initiatives leave no doubt that education lending and servicing

and the regulation of education lenders and servicers are a top priority for the CFPB

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Published In: Administrative Agency Updates, Consumer Protection Updates, Education Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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